Loan
$1 buyout lease
Fair-market-value lease
Cheapest route (total cost minus ownership value)
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| Route | Monthly | Total paid | Value owned at end | Net cost | Cost per hour |
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Illustrative only. Not an offer of credit, a quote or financial advice. Lenders and contractors set real prices and rates.
How to use the lease vs buy calculator
- Price, term, hours and resale value describe the machine and how you'll use it. Resale value is the figure most people guess at; dealer trade-in offers and auction results for similar age and hours are the honest sources.
- Annual operating costs (insurance, maintenance, storage) apply whichever route you choose, so they don't change the ranking but they do change the cost per hour.
- Loan: down payment and APR from a lender quote.
- $1 buyout lease: the implicit rate from the lessor's quote; it behaves like a loan with little down.
- FMV lease: the residual the lessor sets and the implicit rate; choose whether you'd return the machine or buy it at the residual.
Reading the results
The ranking is on net cost: total paid minus the value you own at the end, plus operating costs. A low monthly payment on an FMV lease often loses once you count that you own nothing at the end, and wins when you genuinely want to hand the machine back and upgrade. Cost per operating hour turns the whole comparison into one number you can set against your rental rate or your billing rate: a machine that runs 300 hours a year is often cheaper to rent; one that runs 1,200 or more usually justifies owning.
Worked example
A $150,000 excavator over 60 months, 1,000 hours a year, $52,000 resale: the loan with 10% down costs about $187,000 total and leaves you owning $52,000; the $1 buyout lease about $198,000 with the same ownership; the FMV lease about $148,000 with nothing owned, or about $200,000 if you buy it out. Net of ownership, the loan is cheapest. Our guide to equipment financing vs leasing explains each structure, and construction equipment financing covers rates, terms and what lenders look for.
What the calculator leaves out
- Tax treatment: Section 179 and bonus depreciation for owners, deductible payments for operating leases. Ask your CPA; IRS Publication 946 (in the sources below) sets out the rules.
- Hour limits and excess-use charges on leases, and return-condition charges.
- Early termination costs, which are usually worse on leases.
- The cost of the machine sitting idle; the equipment loan calculator and the markup calculator help price that into bids.
Frequently asked questions
Is it cheaper to lease or buy construction equipment?
Buying is usually cheaper net of ownership if you'll keep and use the machine for years; leasing wins on cash flow and when you want to upgrade or return it. The calculator ranks the three routes on net cost for your numbers.
What is a $1 buyout lease?
A lease where you make payments for the term and then buy the equipment for $1. Economically it's close to a loan with little money down and is usually treated like a purchase for tax.
What is a fair-market-value lease?
A lease where payments cover only the expected depreciation; at the end you return the machine, renew, or buy it at market value. Lowest payments, no ownership.
How do I calculate cost per operating hour?
Net cost of the machine over the period (payments plus operating costs minus resale value) divided by the hours it runs. Compare it with your rental rate or billing rate.
Can I lease used equipment?
Yes; many lessors lease used machines, usually with shorter terms and higher implicit rates.
Sources and further reading
Primary sources we rely on for this page. Program rules change, so check the source before you rely on a figure.